Spoiler or Stabilizer?
Assessing the Role of Private Military and Security Companies in Armed Conflicts
Dissertation zur Erlangung des akademischen Grades des Doktors der Sozialwissenschaften (Dr. rer. soc.)
vorgelegt von Tahmina Sadat Hadjer
an der
Universität Konstanz
Sektion Politik - Recht - Wirtschaft
Fachbereich Politik- und Verwaltungswissenschaft
Tag der mündlichen Prüfung: 27. Juni 2013 1. Referent: Prof. Dr. Gerald Schneider
2. Referent: Prof. Dr. Dirk Leuffen 3. Referent: Prof. Dr. Christopher Kinsey
Konstanz, 2013
Konstanzer Online-Publikations-System (KOPS) URL: http://nbn-resolving.de/urn:nbn:de:bsz:352-245391
To my parents, Aeicha and Sarwar Hadjer,
and my brother, Tayeb Hadjer
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Contents
Contents ... i
List of Tables...iv
List of Figures...v
List of Abbreviations...vi
Acknowledgments...vii
Abstract ...ix
Zusammenfassung...xi
1 Introduction: Changing Patterns of Security Provision... 1
1.1 The Puzzle, the Argument and the Contribution... 1
1.2 The Private Military and Security Industry ... 3
1.3 Outline of the Dissertation ... 10
Part I Theoretical Framework ... 13
2 Linking Empirical Findings and Theoretical Debate: A Literature Review ... 13
2.1 General Overview of PMSC Literature... 13
2.2 The Academic Debate on the Risks and Benefits of Using PMSCs ... 16
2.3 Previous Theoretical Approaches ... 29
2.4 Conclusion: A Positivist Approach to the Study of PMSCs ... 32
3 Principal-Agent Theory ... 35
3.1 Historical and Theoretical Origins... 35
3.2 Fundamental Concepts of Principal Agent Theory ... 37
3.2.1 The Agent’s Private Information ... 38
3.2.1.1 Adverse Selection ... 39
3.2.1.2 Moral Hazard ... 39
3.2.2 The Optimal Contract ... 40
3.3 Conclusion... 42
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4 A Moral Hazard Model of State and PMSC Interaction... 44
4.1 Overview ... 44
4.2 The Model ... 45
4.2.1 Intuition ... 45
4.2.2 Formal Structure ... 49
4.2.2.1 Players’ Preferences... 51
4.2.2.2 Assumptions... 51
4.3 Actor’s Interaction – Static Game ... 53
4.3.1 Optimal Effort Choice of Principal... 53
4.3.2 Optimal Contract if a Specific Agent is Hired ... 54
4.3.3 Comparison ... 56
4.4 Repeated Interaction – Dynamic Game... 58
4.5 Impact on Host States... 63
4.6 Conclusion: Translating the Model’s Implications into Empirical Analysis... 65
Part II Empirical Analysis ... 69
5 The Impact of PMSCs on Civil War Severity - Do Incentives Matter? ... 69
5.1 Overview ... 69
5.2 Hypothesizing the Impact of PMSCs on Civil War Severity... 69
5.3 Empirical Design... 71
5.3.1 Data and Operationalization ... 71
5.3.1.1 Measuring the Effort Level of PMSCs ... 71
5.3.1.2 Measuring the State’s Credible Promise to Forward a Bonus... 73
5.3.1.3 Measuring the Presence of PMSCs in Civil Wars ... 75
5.3.1.4 Control Variables ... 77
5.3.2 Estimation Strategy ... 81
5.3.2.2 Cross-Sectional Regression ... 82
5.3.2.3 Panel Regression... 83
5.4 Findings: How the Prospect of a Bonus Affects the Effort Level of PMSCs ... 85
5.4.1 Results of the Cross-sectional Analysis ... 87
5.4.2 Results of the Panel Analysis... 91
5.4.3 Problematizing Endogeneity Bias: Do PMSCs Enter only Severe Conflicts? .... 93
5.5 Conclusion... 95
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6 Profit through Insecurity? Investors’ Expectations about PMSCs’ Future Profits
... 96
6.1 Overview ... 96
6.2 Related Literature ... 98
6.3 Efficient Market Hypothesis... 98
6.4 Empirical Design... 101
6.4.1 Estimation Strategy ... 101
6.4.2 Case Selection ... 102
6.4.2.1 Publicly Traded PMSCs... 103
6.4.2.2 Afghanistan and Iraq... 105
6.4.3 Data and Operationalization ... 108
6.4.3.1 Measuring Investor Reactions ... 108
6.4.3.2 Measuring Insecurity Events... 109
6.4.4 Descriptive Statistics ... 111
6.5 Findings: How Investors Assess Rising Variable Costs ... 113
6.6 Conclusion... 119
7 Conclusion and Outlook... 120
7.1 Summary and Findings... 120
7.2 Contribution... 126
7.3 Policy Implications ... 127
7.4 Avenues for Future Research... 128
Bibliography... 129
Appendix ... 140
1. Appendix to Chapter 4... 140
2. Appendix to Chapter 5... 148
3. Appendix to Chapter 6... 158
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List of Tables
Table 1: Influential Studies on PMSCs ... 15
Table 2: Moral Hazard and Adverse Selection ... 39
Table 3: Battle-related Deaths and Duration of Civil Wars by Type of Natural Resources and Presence of PMSCs (1960-2000)... 74
Table 4: Overview of Variables ... 80
Table 5: Descriptive Statistics of the Determinants of Conflict Intensity (Cross-sectional Analysis)... 83
Table 6: Descriptive Statistics of the Determinants of Conflict Intensity (Panel Analysis) ... 85
Table 7: Relation between the Presence of PMSCs, Natural Resources and the Conflict Intensity of Civil Wars (1960-2000) – Cross-sectional Analysis... 88
Table 8: Percentage Change in Expected Count ... 90
Table 9: Relation between the Presence of PMSCs, Natural Resources and the Conflict Intensity of African Civil Wars (1960-2000) – Panel Analysis ... 92
Table 10: Conflict Intensity of Civil Wars with and without PMSCs... 93
Table 11: African Civil Wars in which PMSCs Operated... 94
Table 12: Research Period According to Stock Exchange Listing Date and Contracting Period... 103
Table 13: Private Military and Security Companies Listed on Stock Exchanges ... 109
Table 14: Overview of Variables (Analysis II) ... 109
Table 15: Descriptive Statistics of the Returns of Single Stocks and Indexes ... 112
Table 16: Pre-Test Result for the Returns of Single Stocks and Indexes ... 113
Table 17: Event Study Results for Cumulative Abnormal Returns... 114
Table 18: Statistically Significant Abnormal Returns for Individual Events – Afghanistan Sample ... 117
Table 19: Statistically Significant Abnormal Returns for Individual Events – Iraq Sample... 118
Table 20: Presence of PMSCs in Civil Wars Worldwide (1950-200) – Chojnacki et al. (2009) ... 148
Table 21: Overview of PMSC Variables ... 149
Table 22: Presence of PMSCs in African Civil Wars (1950-2000) – UK FCO Dataset (2002)... 149
Table 23: Battle Related Deaths by Conflict Duration and Cold War... 150
Table 24: Negative Binomial Model – Battle Related Deaths (high estimates) ... 151
Table 25: Negative Binomial Model – Battle Related Deaths (best estimates)... 152
Table 26: Poisson Model... 153
Table 27: Poisson Model with Robust Standard Errors... 154
Table 28: Negative Binomial Model without Outliers and Influential Observations... 155
Table 29: Fixed-Effects Model – Battle Related Deaths (high estimates) ... 156
Table 30: Fixed-Effects Model – Battle Related Deaths (best estimates) ... 157
Table 31: Sample Selection Criteria – Afghanistan ... 158
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Table 32: Sample Selection Criteria - Iraq... 159
Table 33: Insecurity Events Afghanistan ... 159
Table 34: Insecurity Events Iraq... 160
Table 35: Insecurity Events Iraq (Counter Sample)... 161
Table 36: Sample Companies’ Contracts in Afghanistan and Iraq (2004 – 2010) ... 161
Table 37: Confounding Events Corresponding to Statistically Significant Events ... 178
List of Figures
Figure 1: Rise of PMSCs since 1990... 4Figure 2: PMSC Typologies ... 5
Figure 3: Number of ICoC Signatory Company Headquarters per Country 2013... 7
Figure 4: The Risks and Benefits of Using PMSCs... 22
Figure 5: Afghanistan and Iraq War Casualities... 47
Figure 6: Game Setup... 50
Figure 7: Distribution of Battle Related Deaths (1960 – 2000) ... 72
Figure 8: Distribution of PMSCs over Regions... 75
Figure 9: Correlation between Battle-related Deaths, PMSCs and Natural Resources – Based on Chojnacki et al. (2009) Dataset... 85
Figure 10: Correlation between Battle-related Deaths, PMSCs and Natural Resources – Based on UK FCO (2002) Dataset... 86
Figure 11: Stock Market Reaction in Efficient Markets ... 99
Figure 12: Event Window, Event Date and Estimation Period... 101
Figure 13: Private Security Contractor Personnel in Afghanistan and Iraq (2007 – 2011)... 107
Figure 14: Insecurity Events in Afghanistan and Iraq ... 110
Figure 15: Stock Market and Index Performances and Returns (2004 – 2010)... 175
Figure 16: Distributional Characteristics of Single Stock Returns and Market Indexes Returns ... 177
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List of Abbreviations
AFRC Armed Forces Revolutionary Council
APPF Afghan Public Protection Force
AR Abnormal Returns
BRD Battle-related Deaths
CAR Cumulative Abnormal Returns
CBO Congressional Budget Office
CPA Coalition Provisional Authority
CSTC-A Combined Security Transition Command-Afghanistan
CWC Commission on Wartime Contracting
DEFIN Defence and Aerospace Index
DOD US Department of Defence
EMH Efficient Market Hypothesis
EU European Union
FCO UK Foreign and Commonwealth Office
FTSE Financial Time Stock Exchange
GAO Government Accountability Office
GDP Gross Domestic Product
GSG Gurkha Security Guards
ICoC International Code of Conduct for Private Security Providers
IHL International Humanitarian Law
ISAF International Security Assistance Force
ISOA International Stability Operations Association
JNA Yugoslav People's Army
MPRI Military Professional Resources Incorporated
NATO North Atlantic Treaty Organization
NBM Negative binomial model
NIE New Institutional Economics
NR Normal returns
PAT Principal-Agent Theory
PM Poisson regression model
PMSC Private Military and Security Company
PMSF Private Militär- und Sicherheitsfirmen
PRIO Peace Research Institute Oslo
Q.E.D Quod erat demonstrandum
RCI Rational Choice Institutionalism
RUF Revolutionary United Front
S&P Standard and Poor’s
SIGAR Special Inspector General for Assistance Force
UK United Kingdom
UN United Nations
US United States of America
US EHII University of Texas Estimated Household Income Inequality
WITS Worldwide Incidents Tracking Systems
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Acknowledgments
My doctorate at the University of Konstanz has been challenging and more inspiring and enriching than I could ever have imagined. I am deeply grateful to each of my academic advisors and friends who played a role in making my doctorate and my time in Konstanz memorable.
First and foremost, I cordially thank my supervisors: Prof. Dr. Gerald Schneider, Prof. Dr. Dirk Leuffen and Prof. Dr. Christopher Kinsey. I am especially indebted to Gerald, my first supervisor, who has not only been a great mentor to me but also shaped my intellectual development by keeping pushing me. I can only hope you also enjoyed seeing my progress. Thank you for your excellent comments, time, ideas, and thoughtful suggestions. Dirk, my second supervisor, has always provided me with unreserved support, no matter how short the notice was. Thank you for that as well as for your guidance and helpful suggestions. I owe sincere gratitude to Chris, my third supervisor, who gave me the opportunity to spend a research semester at King’s College and to conduct expert interviews - an experience that I will always treasure. I am also very grateful to your scientific advice and the many insightful suggestions and comments on my research. It is a pleasure to have each of you on the committee.
I graciously thank the German Business Foundation (Stiftung der Deutschen Wirtschaft) for providing me a scholarship to support my doctoral studies. Without their generous support, my PhD work would not have happened. I am also grateful to several grants from the University of Konstanz.
I have been fortunate to come across many adorable and good friends. Thank you, Anemone Mannes, Bonny Thekkumthala, Daniel Finck, Fabiola Diaz, Hanja Blendin, Jasmina Hostert, Matthias Fahn, Pagah Shafein, Roos van der Haer, and Stefan Gutberlet for your precious support throughout my doctorate, for being there in difficult times and all the fun we have together. I would like to express my deep gratitude to Daniel, Hanja, Matthias, Roos and Stefan who not only accompanied me throughout my time in Konstanz but also helped me in finalizing and improving my dissertation.
Daniel, thank you for great fun and a memorable time at the sdw. Hanja, thank you for being not only my fellow in misery and partner in crime but also my second family. I am grateful that I have met you. There is a special place in my heart for Juri and you. Matthias, my friend and co-author, thank you for all the amusing and inspiring talks, for your precious comments on my drafts, and for comparing my spelling style with Thomas Bernhard’s, which I consider a major honour. Roos, thank you for all the fun we have in cinemas and your invaluable support throughout my doctoral studies. I wonder if you already knew, that our talk after my interview tipped the scale to pursue my doctorate
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in Konstanz? Stefan, thank you for your friendship, for always offering me your support and constantly encouraging me.
Finally, I sincerely thank my loved ones: my aunts and uncles, who have been always considerate and supported me, my best friend and partner, Christoph Theis, and my brother and parents.
Christoph, right from the very first day that I met you, your enthusiasm, ambition and determination in life have fascinated and inspired me. Your friendship and love have allowed me to overcome each difficulty that I have faced during my doctorate. Thank you for always supporting and believing in me.
Throughout my life, my parents, Aeicha and Sarwar, and my brother, Tayeb, have encouraged me to strive for the highest goals and made my education and welfare so central to their lives. I am forever grateful to you for your constant love and support. This dissertation is dedicated with love to you. I hope this is well worth your expectations.
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Abstract
Private Military and Security Companies (PMSCs) have become a major global player within the international security structure and have gained intensive media and academic attention – particularly since their involvement in international interventions such as in Afghanistan in 2001 and in Iraq in 2003, where they served intermittently as the second largest occupying power after the United States. Given the legal grey area in which PMSCs operate and their incisive impact on issues such as the legitimate use of force and security as a public good, the increased use of PMSCs has been the subject of much academic and public controversy.
Previous research on PMSCs has largely focused on contextual factors that have facilitated the emergence and rise of the private military and security industry, on the consequences of using PMSCs on issues such as state sovereignty and authority, democratic mechanisms, security, human rights, and on the question how to establish effective accountability, monitoring and regulatory mechanisms. Studies investigating factors that are conducive to a spoiling or stabilizing role of PMSCs in conflict are rare. This is particularly astonishing given the increased reliance of states as well as non-state actors on the support of PMSCs when operating in conflict zones. However, in order to benefit from the advantages and minimize the risks associated with the use of PMSCs, it is of utmost importance to understand the mechanisms driving the behaviour of PMSCs and to identify parameters that actually can be influenced to induce a desired performance of PMSCs.
Therefore, this thesis tries to fill this niche by analyzing contractual arrangements between states and PMSCs. A formal principal-agent model is developed with which the exact mechanisms driving the behaviour of PMSCs as well as decisive contractual factors that can be constituted by states to induce a desired performance of PMSCs are scrutinized. It is argued that given the existing agency problems and the particular environment in which states and PMSCs interact, traditional ways of assessing performance and providing incentives through explicit contracting is hardly feasible.
Rather, there exists a mutual implicit understanding between states and PMSCs whereby the state incentivizes PMSCs with the prospect of a bonus in case of repeated collaboration – if and when the PMSC has performed well in the previous collaboration. However, due to the implicit nature of the agreement, the state must be able to credibly promise to compensate the PMSC for a good performance. The relation between a credibly promised bonus and the performance of PMSCs is examined in two empirical studies.
First, it is examined whether there is a measurable difference in the conflict intensity of civil wars in which the state was able to credibly commit to a bonus and those in which the principal could not
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promise a bonus. In due consideration of intervening variables, a high effort level of involved PMSCs should negatively affect conflict intensity and vice versa. A cross-sectional analysis of worldwide civil wars in which PMSCs operated shows that in conflicts in which the state could credibly promise a bonus, the presence of PMSCs is significantly associated with lower levels of conflict intensity compared to conflicts in which the state could not promise a bonus.
Second, using an event study it is examined whether investors’ expectations about future profits of PMSCs decrease in view of an anticipated decrease in PMSCs’ performance. The results of the event study indicate that a low effort level of PMSCs (more precisely investors’ perception of such) decreases investors’ expectations about PMSCs’ future profits. However, the findings need to be interpreted with caution as they are not robust across different model specifications.
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Zusammenfassung
In den vergangenen Jahren haben sich private Militär- und Sicherheitsfirmen (PMSF) zu einem bedeutenden Akteur in der internationalen Sicherheitsarchitektur entwickelt und große mediale sowie akademische Aufmerksamkeit erregt. Die zunehmende Bedeutung dieser Akteure wird jedoch aufgrund der rechtlichen Grauzone, in der sie operieren, sowie der Bedrohung, die sie für das staatliche Gewaltmonopol und für die Bereitstellung von Sicherheit als ein öffentliches Gut darstellen, äußerst kritisch diskutiert.
Die bisherige wissenschaftliche Beschäftigung mit diesem Phänomen konzentriert sich insbesondere auf die Frage nach den notwendigen rechtlichen und regulatorischen Rahmenbedingungen für die Aktivitäten dieser Firmen, auf die Untersuchung politisch-ökonomischer Faktoren, die die Entstehung und den Aufstieg der privaten Militär- und Sicherheitsindustrie begünstigten, sowie auf die Erforschung von Konsequenzen, die sich aus einer verstärkten Nachfrage nach PMSF für beispielsweise die Souveränität und das Gewaltmonopol von Staaten, für demokratische Entscheidungsmechanismen, für die Legalität und Legitimität von Gewaltausübung, für menschliche Sicherheit und dem Konflikt, in dem sie operieren, ergeben. Die meisten Studien sind deskriptive Fallstudien, die es schwierig machen, die tatsächliche Rolle von PMSF in einem Konflikt zu bestimmen oder generelle Faktoren zu identifizieren, mit denen man die Performanz dieser Firmen beurteilen könnte.
Es gibt bisher wenige Studien, die gezielt Faktoren untersuchen, die das Verhalten von PMSF beeinflussen und damit dazu beitragen, ob PMSF eine stabilisierende Rolle in einem Konflikt einnehmen, oder ob sie gar zu einer Verschärfung dessen beitragen oder zumindest nicht im besten Interesse der beteiligten Akteure agieren. Angesichts der zunehmenden Nachfrage nach PMSF durch staatliche aber auch nicht-staatliche Akteure und ihrer wachsenden Rolle in Krisengebieten ist diese Forschungslücke jedoch besonders überraschend.
Vor diesem Hintergrund untersucht die vorliegende Dissertation welche Faktoren das Verhalten von PMSF maßgeblich beherrschen und identifiziert Parameter, die der Staat beeinflussen kann, um die von ihm erwünschte Performanz von PMSF herbeizuführen. Dabei wird insbesondere folgende Fragestellung erforscht: Welche Anreizstrukturen können Staaten für PMSF schaffen, um eine höchstmögliche Leistungserbringung dieser Firmen zu generieren? Diese Frage ist der Ausgangspunkt der vorliegenden Arbeit.
Um diese Frage theoretisch und empirisch zu beantworten wird die Beziehung zwischen Staaten und PMSF als ein klassisches Prinzipal-Agenten-Verhältnis aufgefasst, aus dem die Mechanismen, die
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das Verhalten beider Akteure beeinflussen sowie die vertraglichen Rahmenbedingungen, die ein Staat festsetzen kann, um die erwünschte Performanz zu erzeugen, abgeleitet werden. Dabei argumentiert die vorliegende Arbeit, dass in Anbetracht der ohnehin bestehenden Agency-Probleme, die durch das Konfliktumfeld in dem Staaten und PMSF agieren zusätzlich verschärft werden, die Schaffung von Anreizstrukturen durch klassische Entlohnungsschemata im Rahmen einer expliziten Vertragsvereinbarung nur sehr schwer realisierbar sind. Es wird daher angenommen, dass Staaten die notwendigen Anreize implizit schaffen, nämlich durch eine implizite Vereinbarung zwischen Staat und PMSF wonach der Staat eine gute Leistung einer PMSF mit einem Bonus im Rahmen einer erneuten Zusammenarbeit belohnt. Da dieses implizite Versprechen auf einen Bonus nicht vor einer dritten Instanz eingeklagt werden kann, muss der Staat in der Lage sein, ein glaubwürdiges Versprechen zu machen, um die PMSF dahingehend zu motivieren die bestmögliche Leistung zu erbringen. Der Zusammenhang zwischen der Fähigkeit eines Staates einen Bonus glaubwürdig in Aussicht zu stellen und der Performanz von PMSF wird in zwei empirischen Studien untersucht.
Die erste Studie untersucht, ob sich ein messbarer Unterschied in der Konfliktintensität von Bürgerkriegen mit Beteiligung von PMSF feststellen lässt, in denen der Staat glaubwürdig einen Bonus in Aussicht stellen konnte und solchen Konflikten, in denen der Staat kein glaubwürdiges Versprechen machen konnte. Dabei wird angenommen, dass – unter Berücksichtigung intervenierender Variablen, die auch einen Einfluss auf die Konfliktintensität von Bürgerkriegen ausüben - eine hohe Performanz von PMSF sich negativ auf die Konfliktintensität auswirken sollte und vice versa. Die Ergebnisse der Studie bestätigen den vermuteten Zusammenhang: Die Konfliktintensität korreliert negativ mit der Glaubwürdigkeit des in Aussicht gestellten Bonus.
Im zweiten empirischen Teil wird mit Hilfe einer Ereignisstudie untersucht, ob sich die Erwartungen von Investoren börsennotierter PMSF über deren zukünftige Gewinne angesichts einer schlechten Performanz dieser Firmen verringern. Die Ergebnisse der Ereignisstudie deuten an, dass eine minderwertige Leistung von PMSF (bzw. die Einschätzung der Investoren darüber) sich negativ auf Investitionsentscheidungen der potentiellen Anteilseigner auswirkt.
Die theoretischen und empirischen Ergebnisse der vorliegenden Arbeit tragen zu einem besseren Verständnis der Mechanismen, die das Verhalten von PMSF beeinflussen, bei und helfen damit Faktoren zu identifizieren, die dazu beitragen, ob PMSF eine stabilisierende Rolle in einem Konflikt einnehmen, oder ob sie gar zu einer Verschärfung dessen beitragen.
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1 Introduction: Changing Patterns of Security Provision
1.1 The Puzzle, the Argument and the Contribution
“The United States will not be able to conduct large or sustained contingency operations without heavy contractor support” (CWC, 2011:13). This was one of the conclusions of the final report of the Commission on Wartime Contracting, a legislative body which was established by the US Congress to study US wartime contracting in Afghanistan and Iraq in 2008. This quote illustrates the new reality of modern warfare: A considerable amount of previously inherent state functions is outsourced to private companies and states become more reliant on these companies in current and future military operations.
In this context, private military and security companies (henceforth PMSCs) have become an increasingly crucial player. Like no other actor, they illustrate the fundamental change classic warfare has faced. The concept of classic warfare, which centres on the nation state as the exclusive possessor of the monopoly on the legitimate use of force, has been challenged - particularly in the course of the end of the Cold War (Bailes et al., 2007). The process of globalization and the influence of neo-liberal economic models, which are based on the idea that comparative advantage and competition maximize effectiveness and efficiency, triggered the privatization of inherent state functions - among them core security functions (Abrahamsen and Williams, 2007). Furthermore, leading industrial states have not been willing anymore to intervene in armed conflicts which are peripheral to their direct strategic interests (Mandel, 2002; Singer, 2003; Ortiz, 2010). This decreasing willingness has been accompanied by an increased number of internal armed conflicts in regions of weak or failed statehood (Gleditsch et al., 2002). As a further consequence of the end of the Cold War and the removal of imminent danger, many states downsized their militaries, thereby drowning the market with low priced weapons and well trained but unemployed servicemen (Mandel, 2002).
These parallel occurring developments had two complementary effects. On the one hand, the security vacuum in regions of fragile statehood created a strong and urgent demand for private military and security services. On the other hand, a global market of discretionary private military and security services began to satisfy this demand (Singer, 2003). In this context, PMSCs have established themselves as a major global player.
Previous studies on PMSCs have largely focused on politico-economic factors that have facilitated the emergence and growth of the private military and security industry (Shearer, 1998; Zarate, 1998;
Singer, 2003; Kinsey, 2006; Rosén, 2008; Branović, 2011; Buchan, 2011). Another large strand of the literature has explored the consequences of the increased use of PMSCs on issues such as authority,
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democracy, sovereignty of states, the legitimate use of force, security as a public good, and human rights and human security (Avant, 2005; Leander, 2005b; Abrahamsen and Williams, 2010;
Krahmann, 2010). Given the significant impact of PMSCs on traditional understandings of statehood and security provision, the scholarly debate has to a great extent focused on normative questions.
Besides, parts of the discussion suffer from polarization - by either condemning or praising the private military and security industry. Advocates of using PMSCs emphasize the strong demand for privatized military and security provision and the industry’s role in filling the security gap (Shearer, 1998; Brooks, 2000). Critics, on the other hand, consider the strong reliance on PMSCs a threat for state authority and the legitimate use of force and fear the blurring of responsibilities, the weakening of democratic mechanisms and the legal grey area that surrounds PMSCs’ activities (Cilliers and Mason, 1999; Musah and Fayemi, 2000). Both sides, though, are clear about the irreversibility of PMSCs’ presence in the current international security structure. Hence, a third, more pragmatically- oriented, strand of the literature has focused on how to establish effective regulatory, monitoring, accountability, and prosecution mechanisms in order to minimize the risks associated with the use of PMSCs (Chesterman and Lehnardt, 2007; Cockayne et al., 2009; Francioni and Ronzitti, 2011).
However, studies investigating contextual factors that are conducive to the performance of PMSCs are rare. This is particularly astonishing regarding the increased reliance and use of PMSCs not only by states (whether strong or weak) but also by trans-national corporations or non-governmental organizations (Singer, 2001). To a large extent, this is driven by the difficulty of finding sufficient empirical evidence. However, understanding the mechanisms that drive PMSCs’ behaviour and identifying parameters which states can influence in order to induce a desired performance of PMSCs helps us to minimize the risks and benefit from the advantages associated with the use of PMSCs.
The starting point of this dissertation is therefore the question which contextual factors account for a stabilizing or spoiling role of PMSCs in conflict zones. Focusing on factors that actually can be influenced by governments, I ask the question how a state can optimally motivate PMSCs to exercise high effort in order to induce a performance that is in the best interest of all parties concerned. The analysis and answer to this research question unfolds in two steps:
In the first part of the dissertation, I develop a formal principal-agent model in order to scrutinize the exact mechanisms driving the behaviour of PMSCs and to identify decisive contractual factors that can be constituted by states to induce a desired performance of PMSCs. The basic assumptions of principal-agent theory, namely that principal and agent have diverging interests and that there exists information asymmetries, reflect the problems and pitfalls inherent in the relation between states and PMSCs. I will argue that given existent agency problems and the environment in which the interaction between states and PMSCs takes place traditional ways of assessing performance and providing incentives through explicit contracting, is hardly feasible. Rather, there exists a mutual
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implicit understanding between states and PMSCs whereby the state incentivizes PMSCs with the prospect of re-hiring and a higher rent in case of a repeated collaboration – if and when the PMSC has performed well in the previous collaboration. In the second part of the dissertation, I test my argument and the implications of the formal model in two empirical studies in which I statistically examine the performance of PMSCs in different conflict settings.
The research focus and methodological approach of this dissertation allows contributing to existing research both theoretically and methodologically. This is one of the first studies to analyze the implications of using PMSCs in conflict zones with the help of a formal model and quantitative methods. Thereby, this dissertation contributes to the theory building as well as methodological enlargement of this field of research. Furthermore, the results of this dissertation add to the research on contextual factors that are conducive to the performance of PMSCs – a branch of research of highly practical relevance. More precisely, this study contributes to an advanced understanding of the economic and political mechanisms driving the behaviour of both states and PMSCs, the agency problems inherent in the relationship between states and PMSCs, the impact of PMSCs on the conflict they operate in, as well as, the parameters the state is capable of influencing in order to induce a better performance of PMSCs. Thereby, the theoretical and empirical findings of this dissertation offer insights which are highly relevant not only for researchers, policy-makers and principals of PMSCs but also for those actors who are directly affected by PMSCs’ activities.
1.2 The Private Military and Security Industry
PMSCs – a New Phenomenon?
Despite the common perception of PMSCs as a new actor in the international and regional security architecture, the presence of mercenaries, private militias and private military and security actors does not constitute a new phenomenon of national or international security policy. In fact, the provision of security by private actors is based on a long-lasting tradition, which was gradually replaced in the course of the peace of Westphalia in 1684 and the rise of modern nation states in Europe after the French Revolution in 1789 (Thomson, 1994:21ff; Tilly, 1990:67ff). Ever since, the modern nation state claims the monopoly of power, the legitimate use of force, as well as, the right to declare wars and raise armies. In this context, the modern nation state is defined as “a human community that (successfully) claims the monopoly of the legitimate use of physical force within a given territory” (Weber and Gerth, 1991:78). Nevertheless, private actors have remained a component of the military and security sector throughout. A popular example is the British East India Company which commanded a standing army of 200.000 men during the 17th and 18th century (see Singer, 2003:19ff and Roy, 2012).
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What distinguishes the contemporary private military and security industry from past forms are its professional corporate structure and its remarkable rise since the 1990s (see Figure 1). Influenced by the process of globalization and the concept of privatization, which rests upon the idea that comparative advantage and competition maximize effectiveness and efficiency, leading industrial states have been outsourcing core functions such as education, health and security functions (Singer, 2003:66ff). Besides, the end of the Cold War resulted in a security vacuum in the developing world and revealed a number of internal armed conflicts, which threaten local, regional and global stability.
Failed or collapsing states, which are not able to preserve their monopoly over the use of force or to guarantee physical security for their citizens, have created an increasing demand for private military and security provision (Mandel, 2002:60). The demand from both leading industrial as well as weak states is being accommodated by the private military and security industry. Accordingly, the number of private companies offering military and security services has enormously increased, particularly since the end of the Cold War (see Figure 1).
Figure 1: Rise of PMSCs since 19901
The steadily growth of the private military and security industry has lead to an increased media and scholarly interest in PMSCs. There has been, though, little agreement on what PMSCs actually are and what distinguishes them from other private military and security actors. Depending on the respective agenda or normative approach, authors refer with different terms to PMSCs. Some studies use a historical approach and differentiate PMSCs from mercenaries and yet others use the notion
“contractor” – a term which is especially established in the press (Isenberg, 2004; Chesterman and
1 Source: Branovic (2011:28). The dataset, from which this figure was created, starts coding in 1990 and therefore does not comprise PMSCs before 1990s.
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Lehnardt, 2007; Glanz, 2009; Carmola, 2010; Nordland, 2012). In the academic literature it is common to differentiate between private military companies (Shearer, 1998) and private security companies (Schreier and Caparini, 2005). According to these definitions, both types of companies provide their services to public and private actors. However, whereas private military companies provide offensive services, private security companies provide defensive services. In this context, the classifications of Singer (2003) and Kinsey (2006) have been highly influential.
Singer proposes a “Tip-of-the-Spear-Typology” arguing that “the best way to structure the industry is by the range of services and level of force that a firm is able to offer” (Singer, 2003:91).
Singer (2003) organises the companies along their closeness to the frontline, i.e. to the battlefield (see Figure 2). He distinguishes between military support firms (companies providing non-lethal aid and assistance), military consultant firms (companies providing advisory and training) and military provider firms (companies implementing and commanding operations). Taking the public/private dimension into account, Kinsey (2006:9ff) organises PMSCs by the object they secure (private/public) and the means they employ to secure that object (lethal/non-lethal) (see Figure 2). On the horizontal axis, the array of objects that can be secured ranges from private property, such as commercial buildings and oil refineries, to the defence of states. On the vertical axis, the variety of means that can be employed to secure a specific object is displayed, ranging from unarmed security provision to armed fighting.
Figure 2: PMSC Typologies2
However, both Singer (2003) and Kinsey (2006) agree on the limits and pitfalls of an explicit differentiation between private military and private security companies. Companies operating in the private military and security industry often offer a wide range of services including both military and security services. This causes a blurring of lines between presumably exclusively military and solely security services. On these grounds, using a category broad as possible appears most appropriate.
2 Source: Singer (2003:93) and Kinsey (2006:10)
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Hence, in this dissertation, I define PMSCs as commercial and profit-oriented companies, which offer military and security services to private as well as public clients.
Which Services do PMSCs offer and to Whom?
PMSCs offer a wide range of military and security services to a diverse client base (Singer, 2001;
Østensen, 2011). The services offered by PMSCs include combat operations, military assistance, intelligence, operational and logistics support, static security of individuals and property, advice and training of security forces, de-mining and weapons destruction, humanitarian aid, research and analysis, and even facility and infrastructure building (Perlo-Freeman and Sköns, 2008:6; Branovic, 2011:26).
The clients of PMSCs are as diverse as the services they offer. International organizations, like the United Nations (UN), as well as trans-national companies, like British Petroleum, humanitarian non- governmental organizations, and even rebel groups contract PMSCs to provide military and security services (Singer, 2003:183; Holmqvist, 2005:7; Mathieu and Dearden, 2007; Stoddard et al., 2008).3 The Peace Operations Institute, a research institute of the International Stability Operations Association (ISOA – a lobbying organization of the private military and security industry) quantifies the variance as follows: “Governmental entities account for 87 percent of companies’ operations […].
After government, the type of client most contracted with is international organizations, with whom 74 percent of companies contract, followed by non-governmental organizations (70 percent). Less than half of companies (43 percent) contract with private individuals” (Messner and Gracielli, 2007:20). Their regions of operation are likewise wide-ranging. According to the Peace Operations Institute, PMSCs are presently engaged in 144 countries with Iraq and Afghanistan being the largest venues of operation closely followed by Sudan, the Democratic Republic of Congo and Bosnia due to ongoing international missions (Messner and Gracielli, 2007:21). Interestingly, Nigeria is ranked tenth even though there is no international mission or greater conflict. Nigeria’s placement is likely the result of the presence of the oil industry in the Niger Delta. This requires a large number of security providers. Furthermore, PMSCs do not only operate worldwide, they have also headquarters all over the world. Figure 3 shows the number of headquarters per country of PMSCs that have signed the International Code of Conduct for Private Security Service Providers (ICoC).4 As can be seen from Figure 3 the US and UK are home to most of these PMSCs.
3 PMSCs were hired by rebel groups in Zaire (1996-98), Angola (1998), Rwanda (1994), and in Sierra Leone (1998), see Akcinaroglu and Radziszewski (2012).
4 The ICoC is an initiative that aims to clarify international rules of conduct and to improve oversight and accountability.
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Figure 3: Number of ICoC Signatory Company Headquarters per Country 20135 PMSCs during the 1990s
Especially during the 1990s, PMSCs hit the headlines with their combat operations in several African conflicts, where they had been able to shift the conflict in favour of their clients (Shearer, 1998). The South-African PMSCs Executive Outcomes and Sandline International, for example, interfered successfully in the intra-state conflicts in Sierra Leone and Angola (Howe, 1998; Shearer, 1998;
O'Brien, 2000; Musah, 2002). In 1995, the government of Sierra Leone contracted PMSCs to fight against the rebel group Revolutionary United Front (RUF). Initially, the Sierra Leonean government contracted the British company Gurkha Security Guards (GSG) to provide security for the mining company Sierra Rutile and to train the public forces of Sierra Leone (Dokubo, 2000:56). However, shortly after GSG’s arrival in Sierra Leone, the RUF and disloyal elements within the army lured them into an ambush where they lost their commander. As a result, GSG reneged on the contract and left Sierra Leone (Howe, 1998:326). Thereafter, in March 1995, Executive Outcome was contracted to fight the RUF and to restore internal security in Sierra Leone.6 Before operating in Sierra Leone, Executive Outcomes was providing assistance in counter-crime and counter-narcotics activities in Colombia and security services for the Angolan oil company Sonangol in the early 1990s. On the basis of the strength of their military, equipment, tactical, and strategic superiority, Executive Outcomes managed to recapture all major mining regions, to repel the RUF rebels, and to facilitate a cease-fire
5 Source: Private Security Monitor – University of Denver (Avant, 2013)
6 Because Sierra Leone was not able to pay the full amount of $35 million, it granted Executive Outcomes future mining revenues (Shearer, 1998:51ff).
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which ended in a peace settlement in 1996 (Howe, 1998; Francis, 1999; Dokubo, 2000).7 In May 1997, the Sierra Leonean government was again overthrown by a coup d’état in which the military junta aligned itself with the RUF (Francis, 1999:327). On this account another major PMSC became active in Sierra Leone: Sandline International. Sandline International supplied weapons, equipment and expertise to Sierra Leonean government forces and helped in this way the government to extend their power. However, the RUF and its junta allies could not be ultimately defeated (Cleaver, 2000:143).
In the 1990s, a further famous area of operation for PMSCs was the Yugoslav War. In 1994, the US-located PMSC, Military Professional Resources Incorporated (MPRI) was contracted by the Republic of Croatia to train the Croatian military and transform it into a modern and professional force (Ortiz, 2007).8 During the war, the Croatian army had suffered several defeats by the Yugoslav People’s Army (JNA). MPRI supported the Croatian army and Defence Ministry only with training in leadership skills and education of military and civilian personnel because the UN Security Council arms embargo of 1991 prohibited weapons transfer, military planning, intelligence services, and strategy or tactics support to any party of the Yugoslav war (Cilliers and Douglas, 1999:111). The improvement in the Croatian army, however, was spectacular. Shortly after the beginning of MPRI’s activities, the Croatian army launched an operation against the Serb-held Krajina region of Croatia and made the JNA and its Serbian allies retreat. As Singer (2003:126) states: “In a shocking fashion, the Croat army revealed that it had transformed from a ragtag militia into a highly professional fighting force.” This operation was the turning point in the Yugoslav war. As the war continued, the Croats managed to regain their territory and to occupy parts of Bosnia, making the Serbs agree to a cease fire, which ended up in the Dayton Agreement in 1995. In the light of the improvements of the Croatian army’s capabilities, the Bosnian government is said to only have signed the agreement on condition that they also would get support from MPRI (Singer, 2003:126ff). Many observers have drawn attention to the paradox how an outmoded army was able to improve and make use of sophisticated war techniques in such a short time (Shearer, 1998:59). As Singer (2003:127) argues:
“Even if specific assistance on the offensive was not given, it is extremely possible that MPRI training exercises given to their Croat clients, such as war gaming, were tailored to such a contingency.” To date the extent to which MPRI was involved in the Croatian operation has been a controversial and much disputed subject. MPRI, anyhow, got broad public and scientific attention and secured new contracts (Smith, 2002:110).
7 For a detailed description of Executive Outcomes’ operation Sierra Leone, see: Singer (2003), Richards (2005), Howe (1998), Cleary (1999), Francis (1999).
8 It was the Pentagon, however, who referred the Croatians to MPRI (Singer, 2003:124).
9 PMSCs after 9/11
Direct combat operations are the exception rather than the rule today. In recent years, PMSCs have been performing mostly logistics support, static security of individuals and property, advice and training of security forces, or de-mining and weapons destruction rather than combat operations (Branovic, 2011:27). They are involved in multi-national (humanitarian) interventions, in peace- keeping operations, by order of trans-national companies, or in international military operations, such as in Afghanistan and Iraq (Singer, 2003).
The recent wars in Afghanistan (2001) and Iraq (2003) initiated a new phase of private military and security provision and increased remarkably the use of PMSCs by democratic countries.
According to the US Government Accountability Office (GAO), the US Department of Defence employed 100,000 private military and security contractor personnel in Iraq and about 107,000 in Afghanistan at the end of the first quarter of fiscal year 2010 (Solis, 2010:3).9 Furthermore, the US Department of Defence hired thousands of contractors in Kuwait and elsewhere to support their operations in Iraq and Afghanistan. By comparison, only about 9,200 contractor personnel supported the military operations in the second Gulf War 1991 (Solis, 2010). The operations of PMSCs in Afghanistan and Iraq suggest how strong the dependence on the private military and security industry in future military operations will be.10
Moreover, PMSCs are not only constantly gaining more significance in terms of their considerable contribution to contemporary conflict resolution but have also become a major economic player. It is difficult to estimate the economic value of the private military and security industry due to the lack of reliable data and the secretive nature of the industry. There are, however, some sources of information. In 2004, for example, the Centre for Public Integrity’s “Windfalls of War” project announced that more than 150 US PMSCs have earned almost US $48.7 billion for fulfilling contracts in Afghanistan and in Iraq (cited in Schreier and Caparini, 2005:2). Other estimates suggest that the annual revenue of the private military and security industry has increased from US $55.6 billion in 1990 to US $200 billion in 2002 and is expected to increase by another 30 to 85 percent within the next years (Holmqvist, 2005:17; Singer, 2001:199). Additionally, according to the Peace Operations Institute, the average gross revenue of PMSCs increased by 86 percent over five years, from US $137 million in 2002 to US $256 million in 2006 (Messner and Gracielli, 2007:17).11 In 2007, the New York Times reported that US $4 billion per annum are spent on PMSCs (Broder and Rohde, 2007).12 The
9 In Iraq, approximately 72,000 are third country or Iraqi nationals. In Afghanistan, approximately 81,000 are Afghan nationals.
10 I elaborate on the role of PMSCs in Afghanistan and Iraq in more detail in Chapter 6.
11 According to the US Commission on Wartime Contracting, PMSCs in Iraq and Afghanistan received more than US $206 billion in 2011 (CWC, 2011).
12 Please note that this data only refers to the US State Department. Other departments, for example the US Department of Defence, are not included.
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majority of the money went to companies like Blackwater USA (now Academi) and DynCorp International. Up to US $2.2 billion have been paid to DynCorp International for police training and drug eradication in Iraq, Afghanistan and Latin America (inter alia).13 In 2008, the US Congressional Budget Office (CBO) studied the use of contractors in Iraq to support US activities.14 The CBO estimated that from 2003 through 2007, US agencies awarded US $85 billion in contracts for work performed in Iraq (Frisk and Trunkey, 2008:1). Moreover, the “defense support service” markets in the United Kingdom (UK), Germany and Australia have been estimated to be around US $11 billion per year (Perlo-Freeman and Sköns, 2008:8). And the Small Arms Survey estimated the worldwide security market to be worth about US $100 to 165 billion per year, annually growing about 7 to 8 per cent in 2011 (Florquin, 2011:103).
The private military and security industry is politically, military and financially highly emergent.
Contemporary military interventions and peace-keeping operations have become unfeasible without the support of PMSCs. Despite of the industry’s significantly increasing role, substantial insights into the industry are scarce. Hence, there is an urgent need for systematic scientific research in order to shed light on an industry the international community is heavily reliant on.
1.3 Outline of the Dissertation
In consideration of the increasing reliance of states, as well as, non-state actors on the services of PMSCs, the question of how to induce a desired performance of PMSCs becomes highly relevant.
Hence, this dissertation addresses this question in a conjunction of theoretical and empirical approaches.
The remaining of the dissertation unfolds in two steps. Part I of the dissertation outlines the theoretical framework and Part II addresses the theoretical findings in two empirical studies.
CHAPTER 2 reviews and discusses the general literature on PMSCs. In this chapter, I introduce the different branches of scholarly attention towards PMSCs and the most influential studies to date.
Furthermore, I systemize and discuss the controversial scholarly debate on the perils and promises of hiring PMSCs. After that, I present existing theoretical approaches to the study of PMSCs. In the last section, I discuss the conceptual and methodological weaknesses and gaps in the literature and place this study in the context of previous research on PMSCs. Thereby, I point out the added value of this study to the existing literature and introduce my theoretical framework.
13 Blackwater was said to have received US $593 million in revenues from US federal contracts in 2006. Triple Canopy, an armed security provider, was said to have had contracts worth US $170 million in 2007. Aegis Defence Services was said to have revenues of US $113 million in 2005. For more information, see: US Congress (2007).
14 These calculations consider also contractors in Iraq, Bahrain, Jordan, Kuwait, Oman, Qatar, Saudi Arabia, Turkey, and the United Arab Emirates as support for the US Iraq mission.
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CHAPTER 3 discusses the historical and theoretical origins of principal-agent theory and introduces its fundamental assumptions and concepts. The purpose of this chapter is to provide the conceptual basis for the formal principal-agent model presented in the subsequent chapter and to discuss the applicability of principal-agent models for examining PMSCs.
CHAPTER 4 analyzes with the help of a formal-principal agent model, the relationship between a state and a PMSC. The model provides the theoretical foundation for the empirical chapters in which the model’s implications are empirically examined. Building on the literature review in the preceding chapters, I discuss the diverging interests of states and PMSCs, as well as, potential agency problems.
Thereafter, I examine formally why states hire PMSCs in the first place and how they can optimally incentivize them to exercise high effort in fulfilling their tasks. Thereby, I analyze a state’s optimal choice whether to perform a military or security task itself, hire a PMSC and optimally design the contract, or completely abstain from performing the task. One of the main implications of the formal model is that the equilibrium effort level of PMSCs is determined by their variable costs and the expected bonus, more precisely, the state’s credible commitment to later compensate a PMSC for a good performance. In other words, the higher the chance of a bonus, the higher will be the effort level of a PMSC; and the higher the variable costs a PMSC faces, the lower its effort level will be.
These results are the subject of the subsequent empirical chapters.
CHAPTER 5 examines the implication of the formal model regarding the influence of a credibly promised contingent compensation on the effort level of PMSCs. Using a cross-sectional and a panel analysis, I empirically investigate whether there is a measurable difference in the conflict intensity of civil wars in which PMSCs operated compared to those in which PMSCs were not involved and whether there is a difference in the conflict intensity between those conflicts in which the state was able to credibly commit to a bonus and those in which the principal could not promise a bonus. The results of the cross-sectional analysis show that the presence of PMSCs in civil wars is significantly associated with increasing conflict intensity. Furthermore, the empirical results support the implication of the formal models regarding the impact of a bonus on the effort level of PMSCs and show that conflicts in which the state was able to credibly commit to a bonus exhibit lower levels of conflict intensity. The results of the panel analysis, however, are mixed. They neither support the expectation that PMSCs contribute to a worsening of conflict intensity, nor do they provide evidence for the assumption that a bonus increases the effort level of PMSCs. Rather, these results indicate that the presence of PMSCs is associated with lower levels of conflict intensity.
CHAPTER 6 examines the implication of the formal model regarding the influence of high variable costs on the effort level and with that on the profit of PMSCs. Using an event study, I explore how investors of publicly traded PMSCs react to increasing variable costs in the form of a deteriorating
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security situation in countries which the companies operate in. At first sight, the results support the assumption that investors tend to invest less in PMSCs’ stocks after insecurity events. However, a detailed look into the individual events reveals that these results are not robust. In other words, the results of the event study can neither support nor refuse the assumption that a deteriorating security situation decreases investor’s expectations about future profits if PMSCs.
In the last chapter, I summarize my argument and my theoretical and empirical approach.
Furthermore, I highlight the contribution of this study for researching the private military and security industry and discuss the policy implications that follow from my findings. Lastly, I discuss avenues for future research.
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Part I Theoretical Framework
2 Linking Empirical Findings and Theoretical Debate: A Literature Review
What do we know about PMSCs and the political, ethical, practical, and regulatory implications of using these companies in crisis and war regions? Research on PMSCs has been primarily concerned to answer these questions. Particularly since the 1990s, scholarly attention towards the privatization of security and, thus, the body of academic publications on that topic has started to grow. Today, a large group of academics from various disciplines, such as political science, law and economics, are investigating the growing role of PMSCs within the international security arena (Shearer, 1998;
Musah and Fayemi, 2000; Mandel, 2002; Singer, 2003; Avant, 2005; Holmqvist, 2005; Kinsey, 2005;
Schreier and Caparini, 2005; Kinsey, 2006; Chesterman and Lehnardt, 2007). The scholarly debate is highly controversial and covers a broad range of topics. A large part of the literature explicitly or implicitly discusses the perils and promises of using these companies in crisis and war regions.
The remainder of the chapter is organized as follows: I begin with briefly sketching the development phases of the literature on PMSCs and portray some of the most influential pieces.
Then, I systemize and discuss the controversial scholarly debate on the perils and promises of hiring PMSCs and present the point of view of both the proponents and opponents. Then, I present existing theoretical approaches to the study of PMSCs. In the last section, I discuss the conceptual and methodological weaknesses and gaps in the literature and place this study in the context of previous research on PMSCs. Thereby, I point out this dissertation’s added value to the existing literature, introduce my theoretical framework and discuss its applicability for examining PMSCs.
2.1 General Overview of PMSC Literature
In the early 1990s, the phenomenon of (re-)privatization of security attracted researchers’ and journalists’ attention alike. The phenomenon itself was not new, but it showed up in a by then unknown magnitude. The operations of companies like Executive Outcomes and Sandline International in African civil wars presented a commercialized military and security industry that seemed fundamentally different from past experiences. Early studies on PMSCs have therefore primarily focused on historical and descriptive analyses of the private military and security industry and aimed at giving an overview of its global activities and the actors involved, thereby unfolding its
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political and economic networks as well as disclosing potential consequences (Biersteker and Hall, 2002; Mandel, 2002; Singer, 2003; Avant, 2005; Kinsey, 2006; Scahill, 2007).
Table 1 shows a listing of the most influential studies on PMSCs to date as determined by Google Scholar Citations. It can be seen from Table 1 that two studies have contributed immensely to the research as well as our understanding of the private military and security industry. The first one is
“Corporate Warriors” by Singer (2003). In this book, Singer (2003) provides the first comprehensive analysis of the industry. He traces the industry’s beginnings to its present shape and offers a definitional framework for further analysis. Singer (2003) also covers organizational and operational issues and provides deeper insight into the industry as a whole as well as into specific companies.
The second book is Avant’s “The Market for Force: The Consequences of Privatizing Security” (2005) in which she, on the one hand, describes the origins and the current state of the industry and, on the other hand, discusses how the privatization of security might affect the legitimate use of force and violence. Whereas many studies analyze the private military and security industry from a more practice-oriented perspective (see for example Shearer, 1998), Avant (2005) utilizes a theoretical framework building on the so-called “New Institutionalism”. In doing so, she calls attention to the destabilizing effect of privatized security provision on the collective monopoly of the state over the control of force.
The majority of studies investigating the private military and security industry, however, focus on regional case studies and conduct in-depth analyses of specific companies. The involvements of PMSCs in local African conflicts, in the former Yugoslavia and in the recent Iraq War are most prominent (Howe, 1998; Cilliers and Mason, 1999; Francis, 1999; Mills and Stremlau, 1999; Cleaver, 2000; Dokubo, 2000; Büttner, 2003; Singer, 2003; Avant, 2005; Abrahamsen and Williams, 2007;
Gumedze, 2008; Hansen, 2008; Abrahamsen and Williams, 2009; Gumedze, 2011). In this context, the ground-breaking book “Mercenaries. An African Security Dilemma”, edited by Musah and Fayemi (2000), provides an excellent overview and analysis of PMSCs’ activities in African conflicts. The authors cover the involvement of PMSCs in African conflicts during the periods 1950-1989 and 1990- 1998 and examine a total of 80 PMSCs. The editors, though, hold a clear position on the deployment of PMSCs in African conflicts: “This book is meant as potent ammunition to all forces advocating the empowerment of sub-regional bodies as guarantors of local stability within the context of long-term peace-building strategies […] Our encounter with mercenarism on the continents convinces us that the trade is a menace and no effort should be spared in exposing it as such” (Musah and Fayemi, 2000:263).
